Wednesday 16th February 2011 1 Comment
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Fletcher Building is reporting a 7.8% rise in half year net profit to $166 million, as high infrastructure work levels and good cost containment in this country and the stronger Australian economy boosted earnings growth.
Total sales for the six months to the end of December were 2.2% higher than a year earlier at $3.47 billion, the company said today.
That was a result of increased volumes in many of the group's Australian businesses, notably in the laminates and panels, and steel products businesses, although insulation revenues were down significantly as a result of the withdrawal of the Australian government insulation subsidy scheme.
Volumes were mixed across the New Zealand businesses, but revenues in the distribution and construction businesses were higher and Fletcher Residential house sales were up strongly.
Formica continued to achieve good sales growth in Asia but European volumes declined further, Fletcher Building said.
An interim dividend of 16c per share would be paid, compared to 14cps last year.
The company said it expected full year net earnings to be within the analysts' range of $313 million to $396 million.
That assumed no further deterioration in construction volumes in this country, robust economic performance in Australia and Asia, and stable markets in aggregate across Europe and North America.
Chief executive Jonathan Ling said the result was strong in the context of mixed market conditions.
"In New Zealand the recovery in residential house building activity has stalled, but high infrastructure work levels and good cost containment aided earnings growth," he said.
"The stronger Australian economy has meant that most of our businesses there have achieved pleasing earnings growth."
"Beyond Australasia, Formica has continued to lift its earnings through continued growth in Asian revenues and higher North American margins despite flat volumes in that market."
The Canterbury earthquake and continued aftershocks had a negative impact on the company's New Zealand businesses in the first half of the year.
While a positive impact was expected as repair and reconstruction efforts gained momentum that may not be significant in the second half, Ling said.
Similarly, Fletcher Building had seen business disruption in January as a result of the Queensland and Victorian floods but expected activity to pick up later in the year as rebuilding work got under way.
In the laminates and panels division, sales rose to $1 billion from $965 million a year earlier, and operating earnings lifted 14% to $80 million from $70 million.
Within the division, operating earnings for Laminex lifted 27% to $57 million, with Australian revenues up 10% driven by new releases, new housing completions and government stimulus relating to new educational facilities.
At Formica operating earnings lifted 130% to $23 million, although revenue slipped 6% mainly due to foreign exchange movements, and volumes overall were flat.
In the infrastructure division sales rose to $954 million from $919 million, while operating earnings lifted to $77 million from $68 million.
About an hour after the market opened, Fletcher Building shares were down 9c to $8.12.
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